A hotly debated question
A few weeks back, I posted a question on LinkedIn: “Should Legal own contracting?” It touched off a real debate! There is clearly so much energy and interest in this issue. It makes sense – this is one of those complex things that every company has to wrestle with, and that resists easy answers.
The answers were thoughtful and reasoned, reflecting the broad range of opinion on this issue. Some agreed with my starting point premise – that this should be a core GC responsibility. Some suggested more of a balanced, shared ownership model. And some felt that contracting should be led elsewhere in the company.
One thing everyone seemed to agree on: Getting this right matters deeply!
Two sides to the argument: Need and opportunity
Let me make my case for why GCs should own contract lifecycle management. To me, the argument comes down to two big things: need and opportunity.
First, I see a huge unmet need around contracting at many companies. So many enterprises have uneven, mediocre contracting approaches. Time-consuming and manual, they make it hard to see the larger picture and introduce risk by allowing non-standard behavior. These compromised contracting “solutions” don’t really work well for anyone in the company.
Why is this so common? Most often, it comes down to a muddled ownership model. Everyone owns a piece of contracting: Sales, Legal, IT, Finance, Procurement, and on and on. And when something is owned by everyone, it is really owned by no one.
I have had countless conversations with friends and community members from all parts of an organization who have said that their internal contracting processes are fragmented, broken, and a terrible experience for all, and that a good CLM is much needed. The problem is that they have no idea whose job it is to fix. Over and over I hear that it’s a problem, but “I don’t own it, there are a lot of groups involved.”
Second, I view contracting as an incredible opportunity for GCs. This shouldn’t be viewed as a burden; it’s a profoundly important strategic play for Legal teams that want to make themselves more aligned and relevant to the business.
Let’s explore each side – need and opportunity – further.
Why Legal needs to own contracts
If you want everything to flow into one repository automatically (and not doing this introduces a ton of headaches) then one group needs to take ownership of the contracting process. And it just makes sense that that single owner should be Legal.
Everyone in the company touches contracts… but only Legal touches EVERY contract. We are across everything in a way that one else can or should be. And of course, we are best positioned to minimize risk, standardize terms, and so on. Of course there needs to be a matrix of stakeholders and responsibilities… but the overall ownership should lie with the GC. After all, legal controls need to be put on every contract. Can someone else own the relationships, track the milestones, renewals, dates, compliance, manage obligations, etc? Sure, but the process of tracking it all and owning and maintaining the single source of truth of what is in those contracts should be Legal.
This doesn’t mean “we should make them come to us.” We shouldn’t dictate how other teams work and force them into something that fits our needs but not theirs. So if they want to continue to live in their systems, like Salesforce or Coupa, they should be able to do so. Eventually, however, every contract across the enterprise should flow back to a single, central source of truth.
If you accept that all contracts should ultimately reside in a single location, then it is clear that Legal has to be the overall owner. Because while you could reasonably argue that, say, Sales should own their own contracts, no one would suggest that they should own procurement contracts, for example.
And more than just maintaining a central repository, it’s critical that someone owns the process to ensure the final version of the executed contract gets there and the metadata is properly tagged and notifications are set as reminders for important dates, etc. Which team is going to care about the data integrity more than Legal? How many times have we seen poorly maintained repositories with unsigned or half signed agreements, old versions, etc.
Why Legal should want to own contracts
The other side of the argument focuses on the unique opportunity that CLM affords to innovative Legal teams.
Over the last few years, I hear the same thing all the time from GCs. Ask them what is most important to them, and the answer will come: To become more aligned and relevant to the business. They all want to move Legal from a specialized function to a strategic partner. They all want to have a clear answer for “how are you delivering value to the business?”
And yet some of these same GCs are among those resisting taking ownership for CLM! They don’t see that while undeniably challenging, contracting is an invaluable means to become more relevant, connected, and engaged with the business. You have the chance to fix something that everyone at the company cares about!
It is very clearly in your own interest to do so. Fair or not, Legal teams get blamed for poor contract performance. Any friction or delay is always perceived to be somehow their fault. Contracting is a huge source of tension and negative impressions around Legal, dragging down the reputation of the function. So if you can improve the perceptions and experience connected to contracts, you can substantially improve your relationship with the business.
The other piece that they often fail to see is that there is hidden value in owning contracts. There is so much untapped power in the data… If you can rationalize and aggregate your contracts, and extract and analyze the data, then you can see and predict so much. Contracts are the source of all truth behind every dollar that flows in and out of the company, behind all partnerships and alliances, behind licensing strategies, behind everyone who is hired or contracted to join the workforce, etc. Business simply does not happen without the data in those contracts!
As I’ve said many times before, a company’s contracts are the single most valuable source of insights and data in any organization. Now with AI sitting in CLM and able to help analyze and produce insights into your contracts – and therefore your business makes this an even more powerful tool that you want to own. Use that data to manage up and you will absolutely change how your leaders see Legal. Imagine having the ability to see trends and hotspots in the company, being capable of conducting strategic analysis on things like running pricing change scenarios on your contracted deals, like forecasting quarterly sales figures with high levels of accuracy based on close likelihood, and knowing how to reduce committed spend.
I think one thing that holds GCs back from taking on CLM is their sense that it is technically complex. The reality has changed tremendously, however, with the rise of modern digital contracting solutions. Now, we have advanced options that are perfectly suited for transforming and elevating contracts across your business.
And AI is really starting to push out the limits of what is possible in contracting even further! Already, we’re seeing AI-powered solutions on the market that make it so much easier to build, manage, and optimize a strong contracting solution, while also helping you extract insights from the data.
The bottom line… There’s never been a better time to jump into CLM.
A shared model… with Legal at the center
It all adds up to one conclusion. Forward thinking GCs should see contracts management as a differentiator. It gives them a chance to move from being the bottleneck to being the hero, and there are game-changing solutions out there now to help.
Doing this right means positioning yourself at the center of a distributed hub of stakeholders, all with complex needs and requirements. This is real work – it takes time, dedication, and focus – but it is also a great opportunity to expand relationships and relevance across the business.
This is exactly how you earn a seat at the leadership table! Ultimately, this is an investment in the business and its people – and a chance for Legal to solve one of its longest-running problems while claiming a big win.
Of course, that’s just my opinion… what do you think?
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
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